Risk Update

Advanced Waivers — Advanced Conflict Waiver Stands for “Experienced, Frequent & Sophisticated” Client

Posted Dan Bressler

“Judge Rejects Coke’s Motion to Disqualify Paul Hastings, Says Beverage Giant Signed Valid Conflict Waiver” —

  • “A federal judge on Monday denied the Coca-Cola Co.’s motion to disqualify its longtime outside counsel Paul Hastings from representing a startup that has filed a $100 million lawsuit against Coke.”
  • “In a 28-page ruling, U.S. Magistrate Judge Robert Norway of the Middle District of Florida found that Paul Hastings’ representation of the startup was indeed a conflict, but that Coke signed an enforceable conflict waiver when it engaged Paul Hastings to represent it in a human rights matter in April 2021.”
  • “Norway said that whether that waiver should be deemed enforceable came down to whether Atlanta-based Coke is an experienced, frequent and sophisticated consumer of legal services, the background needed to grasp the potential repercussions of what it was signing.”
  • “The answer is clearly yes, the judge ruled, noting that Coke employs between 150 and 200 in-house lawyers and over the last five years has hired more than 50 outside law firms, paying them tens of millions of dollars.”
  • “‘Think of it this way,’ Norway wrote. ‘A magician performing magic tricks is perceived differently by different people. A toddler in the audience might be surprised and delighted to see the magician pull a rabbit out of his hat. Teenagers and adults in the audience may respond differently based on the number and types of magic shows they have experienced. But the seasoned vaudeville actor lurking just off the stage won’t be surprised. Here, Coca-Cola is most like the jaundiced-eyed vaudeville actor. Coca-Cola knew what Paul Hastings is, what Paul Hastings does, and the types of clients Paul Hastings represents. Based on Coca-Cola’s familiarity of the risks involved, its representation by independent counsel, and the disclosure provided, I find that Coca-Cola knowingly waived the specific conflict here—that is, it understood and consented to Paul Hastings serving as counsel to an opposing party in future litigation matters,” Norway added.”
  • “The dispute between Coke and Paul Hastings broke out in March after Paul Hastings hired three lawyers from Cahill Gordon & Reindel who a month earlier had sued Coke on behalf of SuperCooler, a Maitland, Florida, startup whose technology cools canned or bottled beverages to below freezing in seconds.”
  • “After learning that Paul Hastings was taking over representation of SuperCooler, Coke expressed outrage and sued, alleging Paul Hastings had ‘abandoned its ethical obligations’ and should be disqualified”